In this Friday, Dec. 7, 2018 photo, construction continues on large-sized liquefied natural gas (LNG) carriers at the Daewoo Shipbuilding and Marine Engineering facility in Geoje Island, South Korea. More than half of the 35 vessels scheduled for delivery in 2018 were LNG carriers. A similar number of vessels are lined up for completion in 2019. (AP Photo/Ahn Young-joon)

Global LNG terminal survey casts doubt on industry as ‘safe bet’

The failure rate for proposed LNG export terminal projects between 2014 and 2020 is 61 per cent, study says

  • Jul. 7, 2020 12:40 p.m.

By Carl Meyer, Local Journalism Initiative Reporter, National Observer

A new report is raising questions about the long-term viability of the liquefied natural gas export industry around the world as the Trudeau government continues to signal support for one such project in B.C.

The natural gas industry is facing multiple headwinds, from a collapse in demand due to COVID-19 disruptions, to competition from renewable energy sources, and protests against fossil fuel expansion such as those in support of Wet’suwet’en against the Coastal GasLink pipeline through B.C.

A global survey of LNG terminals released Monday by the San Francisco-based Global Energy Monitor research network outlines the central risk facing the hundreds of billions of dollars in sunk investments in LNG infrastructure: That some of these structures could become underused, or stranded, long before the end of their useful lives.

“LNG was once considered a safe bet for investors,” said research analyst Greig Aitken, one of the report’s five authors. “Suddenly, the industry is beset with problems.”

The survey points out that Warren Buffett’s investment company, Berkshire Hathaway, yanked a $4-billion investment this March in a key LNG plant in Quebec called Energie Saguenay.

In media reports, the company backing the project, GNL Quebec, cited the “current Canadian political context,” including “instability” from the rail blockades set up in support of Wet’suwet’en, as an explanation.

“The story of Berkshire Hathaway’s change of heart on LNG begins in British Columbia,” reads the survey, titled “Gas Bubble 2020.”

The survey also refers to several other LNG terminal projects in Canada that have either been abandoned or are seeing delays, investment pullouts or no obvious progress in years.

This includes the cancellations of the proposed Aurora LNG plant and the Pacific NorthWest LNG plant near Prince Rupert, and the Malahat LNG project in the Saanich Inlet in 2017, as well as the Grassy Point LNG project on the North Coast of B.C. in 2018.

Another five projects have seen “no progress” in years, while three more are either delayed or have seen a work stoppage, the survey found. Globally, it said some projects that haven’t yet broke ground for construction are now experiencing a “widespread pullback” in enthusiasm.

The Trudeau government has supported the construction of LNG Canada, a $40-billion LNG facility being built in Kitimat, B.C., to be fed by fracked gas delivered by Coastal GasLink. The project, which would liquefy the gas and then load it on ships to be exported to Asia, received $275 million in federal contributions.

Natural Resources Minister Seamus O’Regan has described that money as a “generational investment” that will help “create the future.” In Parliament, O’Regan said the project would create “hundreds of millions of dollars in construction contracts for Indigenous businesses,” while “helping to reduce coal plant emissions in Asian markets.”

In March, National Observer reported that this claim — that shipping the product to China to displace coal-fired electricity generation there would reduce carbon pollution by “60 to 90 million tonnes annually” — stemmed from a “theoretical” calculation made by an adviser hired by LNG Canada, and that didn’t take real-world factors into account.

A report released last month by sustainable development consulting firm Horizon Advisors argued that a Canadian Crown corporation’s support for the Coastal GasLink pipeline was undermining the country’s own climate goals of cutting carbon pollution 30 per cent below 2005 levels by 2030 and reaching “net-zero” pollution by 2050.

A spokesperson for LNG Canada said its joint venture participants “took a long-term view when they made the decision to proceed with LNG Canada understanding very well long-term LNG demand growth to support decarbonization from coal fired electricity, industrial and residential heating and to provide baseload power for renewable power.”

The commitment to the project by the joint venture participants, which are British-Dutch firm Shell, Malaysia’s Petronas, Japan’s Mitsubishi, PetroChina and the Korea Gas Corporation, “has not wavered” said the spokesperson.

National Observer asked O’Regan’s office whether the survey’s results changed the minister’s stance on the industry in Canada. The office could not offer a response before publication.

Over the last year, the amount of LNG terminal capacity under construction around the world jumped from $82 billion US to $196 billion US, according to the survey. This is due to an anticipated surge in demand for natural gas from places like China, Japan, Europe and Southeast Asia.

But the economic atmosphere that led to these massive investments is running up against “climate and economic reality,” the survey states. “Even before the twin shocks of the COVID-19 pandemic and global gas price collapse, LNG projects were facing an increasingly difficult economic environment,” it said.

Gas markets were becoming oversupplied, prices were falling, and renewables, bolstered by better battery technology, were becoming more competitive. With the added drop in demand and worksite restrictions from COVID-19 this year, not to mention public opposition, some companies have reconsidered investment decisions.

Worldwide, the failure rate for proposed LNG export terminal projects between 2014 and 2020 is 61 per cent, the survey calculated.

Last month LNG Canada and other energy firms launched the Canadian LNG Alliance, to “reflect the critical role LNG has to play in Canada’s COVID-19 economic recovery,” as well as “economic reconciliation” with Indigenous peoples and Canada’s “clean energy transition.”

The group argued that LNG projects in British Columbia would produce “among the world’s lowest-emissions intensity LNG” as they would be partly powered by hydro-electric power.

But the survey suggests that the reputation of LNG as an “environmentally benign” fuel that is less dirty than coal has been debunked by scientific studies highlighting the serious impact of methane on global warming.

Methane, a greenhouse gas that is the main component of natural gas, is 86 times as powerful as carbon dioxide in trapping heat in the atmosphere over a 20-year period. Scientific studies have connected a rise in global methane levels with the fracking boom, and say this rise in atmospheric methane is undercutting efforts to hold the global temperature rise to 2C above pre-industrial levels.

A 2017 peer-reviewed study in the journal Atmospheric Chemistry and Physics found that methane leaks from B.C.’s oil and gas industry were at least two and a half times higher than provincial estimates.

Like us on Facebook and follow us on Twitter.

Want to support local journalism? Make a donation here.

LNG

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

The students in the Timberline Musical Theatre program rehearse this year’s production, Once Upon a Mattress, three days per week after school in preparation for next month’s virtual performances. Photo by Mike Davies/Campbell River Mirror
Timberline’s popular musical goes online for 2021

Once Upon a Mattress will be streamed right to your living room thanks to school’s AV department

A health-care worker prepares a dose of the Pfizer-BioNTech COVID-19 vaccine at a UHN COVID-19 vaccine clinic January 7, 2021. THE CANADIAN PRESS/Nathan Denette
Employers might be able to require COVID-19 vaccination from employees: B.C. lawyer

‘An employer must make the case’ using expert science, explains lawyer David Mardiros

An Atlantic salmon is seen during a Department of Fisheries and Oceans fish health audit at the Okisollo fish farm near Campbell River, B.C. in 2018. The First Nations Leadership Council says an attempt by industry to overturn the phasing out of salmon farms in the Discovery Islands in contrary to their inherent Title and Rights. (THE CANADIAN PRESS /Jonathan Hayward photo)
First Nations Leadership Council denounces attempt to overturn salmon farm ban

B.C.’s producers filed for a judicial review of the Discovery Islands decision Jan. 18

A fire broke out near the Willow Point Bottle Depot early on Jan. 22. Photo courtesy Ashley Laycock
Two injured in early-morning fire in Campbell River

Sailboat fire also attended by Campbell River fire crews

Terrance Josephson of the Princeton Posse, at left, and Tyson Conroy of the Summerland Steam clash during a Junior B hockey game at the Summerland Arena in the early spring of 2020. (John Arendt - Summerland Review)
QUIZ: How much do you know about hockey?

Test your knowledge of Canada’s national winter sport

Is it time to start thinking about greener ways to package cannabis?

Packaging suppliers are still figuring eco-friendly and affordable packaging options that fit the mandates of Cannabis Regulations

A woman injects herself with crack cocaine at a supervised consumption site Friday, Jan. 22, 2021 in Ottawa. THE CANADIAN PRESS/Adrian Wyld
Drug users at greater risk of dying as services scale back in second wave of COVID-19

It pins the blame largely on a lack of supports, a corrupted drug supply

Wet’suwet’en supporters and Coastal GasLink opponents continue to protest outside the B.C. Legislature in Victoria, B.C., on Thursday, February 27, 2020. THE CANADIAN PRESS/Chad Hipolito
‘We’re still in it’: Wet’suwet’en push forward on rights recognition

The 670-km Coastal GasLink pipeline was approved by B.C. and 20 elected First Nations councils on its path

The sky above Mt. Benson in Nanaimo is illuminated by flares as search and rescuers help an injured hiker down the mountain to a waiting ambulance. (Photo courtesy Nanaimo Search and Rescue)
Search plane lights up Nanaimo mountain with flares during icy rope rescue

Rescuers got injured hiker down Mt. Benson to a waiting ambulance Saturday night

Jennifer Cochrane, a Public Health Nurse with Prairie Mountain Health in Virden, administers the COVID-19 vaccine to Robert Farquhar with Westman Regional Laboratory, during the first day of immunizations at the Brandon COVID-19 vaccination supersite in Brandon, Man., on Monday, January 18, 2021. THE CANADIAN PRESS/Tim Smith - POOL
Top doctor urges Canadians to keep up with COVID measures, even as vaccines roll out

More than 776,606 vaccines have been administered so far

From the left: Midway RCMP Csts. Jonathan Stermscheg and Chris Hansen, Public Servant Leanne Mclaren and Cpl. Phil Peters. Pictured in the front are Mclaren’s dog, Lincoln and Peters’ dog, Angel. Photo courtesy of BC RCMP
B.C. Mounties commended for bringing firewood to elderly woman

Cpl. Phil Peters said he and detachment members acted after the woman’s husband went to hospital

Dr. Jerome Leis and Dr. Lynfa Stroud are pictured at Sunnybrook Hospital in Toronto on Thursday, January 21, 2021.THE CANADIAN PRESS/Frank Gunn
‘It wasn’t called COVID at the time:’ One year since Canada’s first COVID-19 case

The 56-year-old man was admitted to Toronto’s Sunnybrook Health Sciences Centre

An Uber driver’s vehicle is seen after the company launched service, in Vancouver, Friday, Jan. 24, 2020. Several taxi companies have lost a court bid to run Uber and Lyft off the road in British Columbia. THE CANADIAN PRESS/Darryl Dyck
Taxi companies lose court bid to quash Uber, Lyft approvals in British Columbia

Uber said in a statement that the ruling of the justice is clear and speaks for itself

Most Read